Earlier this week, the Congressional Budget Office released its revised estimates of what Obamacare will cost, now that the Supreme Court has weighed in. As I read the report, it occurred to me to ask: how have the CBO’s estimates changed over time? It turns out that, even when you compare the years that are common to each CBO report, a clear trend emerges. Today, the CBO believes that Obamacare will spend more money, raise more tax revenue, and reduce the deficit less than the agency thought in 2010. And things could get worse.

Be warned: this article contains a lot of numbers. If your eyes glaze over reading numbers (as mine do), focus on the charts. The charts tell the story of how the CBO’s estimates have changed over time.

Introduction

For the purposes of this analysis, I looked at three sets of CBO projections: (1) the March 20, 2010 report that was published hours before the final Obamacare vote in Congress; (2) the February 18, 2011 report estimating the deficit impact of repealing Obamacare; and (3) the July 24, 2012 report estimating the deficit impact of repealing Obamacare after the Supreme Court ruling.

The first report looked at the fiscal impact of the law from 2010-2019; the second from 2012-2021; and the third from 2013-2022.

Hence, there are two ways to compare the three reports: first, an apples-to-apples comparison of the seven years (2013-2019) common to the three reports; second, by comparing the total ten-year cost of the law reported in each case, to show how the law’s costs increase over time.

There are small technical differences between the first report and the next two, because repealing Obamacare is different from passing it. But these three reports are the ones that go into Obamacare’s fiscal impact at the level of detail I needed to conduct this analysis.

Spending projections for 2013-2019 have increased by $124 billion

In 2010, the CBO estimated that Obamacare’s spending on new programs would amount to $929 billion from 2013-2019, and a ten-year cost of $944 billion. Those figures increased to $956 billion and $1,442 billion respectively in 2011, and $1,053 billion and $1,856 billion in 2012.

By “spending on new programs” I mean all the spending in Obamacare on new programs, principally the cost of expanding coverage via Medicaid and the new exchanges. These figures don’t include the cuts to Medicare, which I will discuss later.

What’s remarkable is that this increased spending comes despite the fact that the CBO estimated that state cutbacks in the Medicaid program, in the wake of the Supreme Court ruling, would reduce government spending by $84 billion from 2012-2022.

In 2010, the CBO estimated that Obamacare’s tax increases would amount to $626 billion from 2013-2019, and $631 billion over ten years. In 2011, the CBO estimated totals of $624 and $968 billion, respectively.

In the most recent report, the CBO projected a 2013-2019 total of $672 billion, and a ten-year total of $1,221 billion.

Revenue projections for 2013-2019 have increased by $46 billion

Note that these totals exclude the impact of the exchange subsidies, which are tax credits and therefore get scored by the CBO as “reducing taxes” even though they functionally are spending measures. The revenue increases in the law include revenues from the individual mandate; the employer mandate; taxes on insurers, drugmakers, and medical device manufacturers; and, most importantly of all, the “Cadillac tax” on high-value insurance plans. As you will see in a later chart, the “Cadillac tax” is the most important component of the law’s taxation features, without which Obamacare would not achieve anything close to deficit neutrality.

Medicare cuts for 2013-2019 have decreased by $59 billion, but ten-year cuts now total $743 billion

One of the interesting aspects of this analysis is what happens to the law’s changes to Medicare. As you may know, the law as passed used $454 billion in cuts to Medicare and Disproportionate Share Hospital payments to fund the law’s expansion of insurance coverage. But those cuts were measured from 2010-2019; the most recent report, measuring cuts from 2013-2022, totals $743 billion in reduced Medicare and DSH spending relative to prior law.

However, in the 2013-2019 period, the CBO now projects that the law will cut Medicare by $384 billion, compared to $443 over the same period in the CBO’s original 2010 estimates. This is because the Obama administration has postponed the law’s mandated cuts to Medicare Advantage, and also because Congress has instituted “doc fixes” that have kept Medicare spending higher than what is specified in current law. These procrastinations mean that future Medicare cuts are more draconian than the ones previously projected.

Deficit reduction for 2013-2019 has decreased from $140 to $4 billion

These three features of the law—the increased spending, the increased taxation, and the smaller near-term Medicare cuts—combine to eliminate nearly all of the projected “deficit reduction” in Obamacare from 2013-2019. In 2010, the CBO projected that Obamacare would reduce the deficit by $140 billion from 2013 to 2019. That has dropped to a measly $4 billion in its most recent report.

The ten-year totals have gone from $143 billion in 2010 to $210 billion in 2011 and $109 billion in 2012.

The “Cadillac tax” is the linchpin of Obamacare’s deficit-reducing credentials

The key to understanding the long-term deficit impact of Obamacare, from the CBO’s point of view, is to understand the “Cadillac tax.” As a reminder, the Obamacare “Cadillac tax” imposes a 40% excise tax on the relevant premiums charged by any insurer that, beginning in 2018, offers a health insurance policy whose value is in excess of $10,200 for individual coverage and $27,500 for family coverage.

Because the CBO assumes that the cost of health premiums will continue to rise at a much faster rate than inflation, the Cadillac tax affects more and more individuals over time. The long-term deficit neutrality of Obamacare hinges on this trend continuing for a long time. As you can see in the below chart, removing the Cadillac tax from Obamacare wipes out the CBO’s estimates of the law’s impact on the deficit.

This is important, because a key feature of Republican plans to replace Obamacare is to adopt a fiscally similar provision to the Cadillac tax: a standard deduction or universal tax credit for purchasing private health insurance. Hence, insofar as supporters of Obamacare claim that repealing the law would increase the deficit, pairing repeal with a standalone reform of the employer tax exclusion for health insurance is a simple solution.

What will the CBO say next year?

Here’s what we don’t know: how will the CBO’s estimates change next year? Will we see a continuation of the trend toward higher spending, higher taxes, and more deficit spending? We might. And that is exactly what the law’s skeptics have feared all along.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

What estimates? you mean the ones revised downwards BEFORE the 2012 Presidential election or the ones after Obama stole another term?

Or, maybe you mean the President Obama’s promised estimates in September 2009, when he said:

“In an Obama administration, we’ll lower premiums by up to $2,500 for a typical family per year….. We’ll do it by the end of my first term as President of the United States.”

It may surprise you to learn that the experts working for Medicare’s actuary have currently reported (September of this year) that Obamacare will increase premiums by $7,450 for a typical family of four.

Do the math, Einstein. That estimate is only 300% higher than President Liar promised.

Costs aside, the ACA is the most illegal, unConstitutional, criminal, and destructive non-Law ever cooked-up by an American President and his cohorts in Congress.

It is nothing less than dropping a hydrogen bomb on our current health care system.

As an American who has spent 3 months a year in Canada since the 1940s I can confirm what a mess the single payer Canadian medical system has done to what was once a well run local medical system.

Here are some of the reasons it is horrible now: Extremely difficult to find a local doctor now who can take on a new patient; Waiting times for surgery and hospital care takes literally months; Available technology like MRIs, etc. per patient is way below USA standards, etc.; Flight of many well trained Canadian doctors to the USA due to decent compensation for their years of training; Limited number of specialty drugs(a Board meets yearly in Ontario to “decide” what the medical system can “afford”), etc. And this is only the tip of the iceberg…..

American take note:::::There is high taxation on literally everything…… both goods and services, (dental care:taxed, plumber service: taxed, stamp for letter: taxed, hair cut: taxed…high liquor, cigarette and gasoline taxes.

Recently, due to their “single payer” health care system, Ontario has had to pass down, to the local counties, services they used to pay for…as in road repair services, etc….what does that mean??? Higher county property taxes. And, oh yes, on their tax return…a line to calculate their salaries so they can pay additional healthcare taxes……

This might not be so bad if the medical system was first rate…unfortunately it serves everyone with poor to mediocre care.

Couldn’t some smart people in the medical system (no I don’t mean a bunch of Administration lawyers and politicans)…find ways to keep the the most advanced medical care in the world available to more people at a reasonable cost without totally wrecking it????

To end…remember..taxation, taxation, taxation!!! And poor medical care in the future….for everyone…grieve now oh middle class…only the wealthy will be able to fly to India, Korea, Switzerland, to be treated in a well run hospital/surgery facility. ..and even the smart Canadians will no longer be able to access the superior American medical system by crossing the border for more advanced and timely care.

Funny. I thought the care we got when there was pretty good. Found services same day (more than I can usually get here). I agree the taxes were horrendous…but general Canadian bureaucracy could share in the fault, not just healthcare.

At the very least, the healthcare does serve everyone without bankrupting them.

I lived in Canada 27 years and now 8 1/2 in US and I find the US system just has hard to get healthcare. I had to wait 2 months before getting my son care when he was in infant because the insurance company said I had to try 2 months of physio before getting the recommended help. He ended up having worse problems in the end. Also, my son has speech problems and insurance does not cover it so he’ll have to do without. In Canada he would not have had those problems.

How is it the fault of the healthcare system that your insurance company told you to try physical therapy for your son (I assume you mean physical therapy)? And the insurance declined to cover it, but it does not mean you did not have access to physical therapy. Meaning, you could have paid out of pocket.

And speech problems shouldn’t be covered by insurance. My son has speech problems and he has to attend speech therapy through his school. Why don’t your state have such a program?